Italy Slashes 2012, 2013 Growth Forecasts Due to Debt Crisis

Italy slashed its economic growth forecasts on Thursday saying it was now expecting contractions of 2.4 percent for 2012 and 0.2 percent for 2013 due to "a deterioration in the international environment."

The government had previously forecast a shrinkage of 1.2 percent in 2012 and an expansion of 0.5 percent in 2013 in a report released in April.

As he presented the new data, Prime Minister Mario Monti stressed 2013 would be "a year of recovery" even though the overall result would be contraction.

"The light of the recovery is visible," Monti told reporters.

The government also said it was not altering a commitment to balancing Italy's budget next year made by the previous government of Silvio Berlusconi.

"The cornerstone of our policies for healing public finances remains unchanged -- the aim of a structural balance in 2013," Monti said.

Thursday's report also forecast that the economy would grow by 1.1 percent in 2014 and by 1.3 percent in 2015 "as demand increases both domestically and internationally and the positive effects of a balanced budget, a decreasing debt and structural reforms permeate throughout the economy."